Blaming human error, a discovery of an unallocated $4.9 million from the 2005-2006 budget year has further muddied the financial waters at Southampton Town Hall. In addition, the issue has created a greater schism on the town board.

On Monday, Southampton Town Supervisor Linda Kabot and Deputy Supervisor Bill Jones held a press conference to give an update to the public on the so-called “missing funds” from the town’s capital program.

Indicating they were “significant findings,” Kabot elaborated on Monday saying an administrative error by the previous comptroller included some $4.9 million that was supposed to be allocated for use in capital projects. The money was entered into the town’s fund, but was never actually transferred to the projects for which it was earmarked.

In January, the town board discovered around $19 million was unaccounted for in the capital accounts. Since then, through reconciliations of the accounts, that number has been reduced to $250,000. Because of these investigations, interviews with the former comptroller revealed the unallocated $4.9 million.

The town board recently made changes to the internal organization designed to figure out the discrepancy in the accounts. The board is also holding weekly work sessions with department heads to determine their needs for capital projects.

Jones explained there are three ways a capital project can be funded: grant funds, direct appropriations, or bonds. Originally, the administration thought the problem was most likely from bonds that were authorized but never issued. Now, Jones explained, the previous comptroller and her office realized last Thursday that money from direct appropriations had never been moved.

“There are two bites to every apple. First, the direct appropriation was posted to the project’s budget,” said Jones explaining a memo he had sent to Kabot on Friday. “Once posted it would appear there was real money available to be spent as needed, but in fact a second step was necessary for this to be true.”

“I am advising you that we have been unable to identify that ‘cash’ or fund balance that was moved in 2005 and 2006,” Jones also said in the memo.

Further, he explained on Monday, the former comptroller’s administration had also incorrectly entered $2 million into their computer program.

“There was a data entry problem as well,” said Jones.

Kabot also announced on Monday, the “2008 capital budget is not at issue.” Though she added she is unsure if the matter will have a budgetary impact.

“It’s a bit premature… but clearly if we relied on fund balances in the year end…likely we need to revisit the 2009 adopted budget,” said Kabot who added “given the economic downturn,” some projects may be reviewed and deemed unnecessary at this time.”

“Yes it will have budgetary impact,” said the supervisor, “but we won’t know how much until we narrow down spending.”

Kabot is also suggesting the state comptroller review this and other significant findings.

“It is unsettling,” said Kabot. “It was a human error and the end result was an overstatement of the general fund balance.”

Now, Jones and Kabot explained, every direct appropriation will have a resolution attached to it so it can be easily traced.

“Direct appropriations were not traced as easily — now anything must have a resolution so it’s searchable,” said Jones.

“I am upset,” said Kabot. “I would’ve liked to know the full amount [unaccounted for] in 2008Â … [the comptroller’s office] still needed to tell us, they have a duty to inform the town board… the audit committee had no knowledge and we did not know it would lead back to direct appropriations of this magnitude.”

Although the supervisor said, “several findings were made,” those won’t be discussed until Friday, April 1. She also said many of the “numbers are still under review,” but she held the conference to “keep everyone in the loop.”

Town Board Meeting on Tuesday

Kabot introduced a walk-on resolution related to the misplaced funds at Tuesday’s meeting calling for a corrective action plan, which was only supported by councilwoman Nancy Graboski. Councilman Chris Nuzzi, councilperson Anna Throne-Holst, and councilperson Sally Pope voted down the resolution.

The resolution stated the $4.9 million “represents nearly 20 percent of the entire capital fund” and asked for an official opinion from Albrecht, Viggiano, Zureck and Company (AVZ), an external auditor, and a second opinion from FTI consulting, forensic auditors.

The resolution also called for the supervisor and the comptroller to create and prepare a corrective action plan, and forward that plan to the New York State Comptroller for review.

“First of all, there was no basis for it, there was no legal basis, in our opinion it was a meaningless resolution,” said Throne-Holst, explaining her decision to not support Kabot’s resolution.

“It was talking about an ‘idea of an action plan’ and ‘an idea of misappropriation and wrong doing,’ and it had dollar figures which are unverified at this point,” added Throne-Holst. “We are going to have a work session on it and I certainly didn’t want my name on it before I know the facts, nor do I see the point in putting that into a resolution.”

“A walk-on resolution should be time sensitive and we are having a work session to address the issues,” said the councilwoman, adding that the resolution had more of a “press release quality to it.”

The board will convene at Southampton Town Hall on Friday for a work session based on the capital program to begin at 10 a.m.Â

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